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Government Waste: Do You Know it When You See it?

With the federal deficit and debt more troubling than ever, politicians have increasingly concentrated on eliminating government waste. President Barack Obama has attempted to address government waste several times, including a 2009 executive order aimed at “eliminating waste, fraud, and abuse in Federal programs” and a subsequent June 13 executive order announcing a new “Campaign to Cut Waste” that will “deliver a smarter and leaner Government.”

Pledging to eliminate government waste seems straightforward, but drawing a line to distinguish between what is waste and what is not is much more difficult. While understanding the roles of fraud, duplication, inefficiency, and general uselessness are critical to cutting waste, personal value judgments are also very important.

Fraud is an obvious and uncontroversial aspect of government waste. Sadly, examples of fraud in government spending are manifest. Federal officials recently said that fraud in unemployment benefits cost the government $17 billion last year. In a 2009 interview, Sen. Tom Coburn (R-Okla.) said that fraudulent Medicare disbursements total at least $80 billion a year.

Like fraud, duplication is a commonplace element of government waste. In March, the Government Accountability Office (GAO) released a 345-page report to “identify federal programs, agencies, offices, and initiatives, either within departments or government-wide, which have duplicative goals or activities.” The GAO asserted that the Department of Defense would save up to $460 million per year by restructuring their healthcare system, and maintained that streamlining policies supporting ethanol production could save up to $5.7 billion annually. However, judging what is duplicative can be tricky. Allegedly duplicative spending can actually serve slightly different constituencies, and not be completely redundant.

The U.S. Postal Service’s (USPS) fiscal difficulties provide an example of another kind of government waste: inefficiency. In a report released in April, the GAO stated, “USPS’s business model is not viable.” Vice President of USPS’s Network Operations Management David E. Williams said in a June 15 congressional hearing that USPS will meet its $15 billion statutory debt ceiling by the end of this fiscal year, despite not being in debt as recently as 2005. GAO went on to assert, "If no action is taken, risks of larger USPS losses, rate increases and taxpayer subsidies will increase.” Meanwhile, businesses like UPS, FedEx, and DHL continue to provide high level service without piling up debt that taxpayers are likely to be stuck with. Yet, just like duplication, judging inefficiency can be difficult. Certain parts of inefficient programs could be very efficient.

A final type of waste, general uselessness, is particularly problematic because it is largely based on subjective judgments. Charges that certain spending is useless can be extremely contentious. The Keynesian view that spending to stimulate the economy is a legitimate government function can also undermine such judgments because it implies that even the most wasteful spending serves an important purpose. Federal efforts to build a $320 million bridge in Alaska that will connect a town of 8,900 and another of 50 is perhaps the best example. Though the so-called “Bridge to Nowhere” was widely condemned, one would have a difficult time convincing someone that planned to use the bridge of the project's uselessness. Since complete uselessness can never be proven, these judgments are particularly problematic.

Understanding these categories can prove a tremendous help in making sense of the current debate about government waste. However, understanding can only take one so far. Though fraud is straightforward enough, it is much more difficult to find a generally accepted line among legitimate spending and waste in duplication, inefficiency, and general uselessness. Much of what constitutes government waste remains an inexact science that includes a role for personal judgments.

So, what is government waste? In the 1964 Supreme Court case Jacobellis v. Ohio, Justice Potter Stewart handed down his famous obscenity judgment standard: “I know it when I see it.” Though categorizing waste helps, a more specific standard than Stewart’s may not be possible.